captioning sponsored by macneil/leer productions >> lehrer: good evening. i'm jim lehrer. president obama today signed into law the first major overhaul of the financial system since the great depression. >> woodruff: and i'm judy woodruff. on the "newshour" tonight, the new law seeks to end the risky practices behind the economic meltdown. we get some perspective on what the president called the strongest consumer protections in history.

>> lehrer: paul solman offers his second report on the financial problems in greece. tonight, the greek underground economy. >> woodruff: we look at the fallout from accusations of reverse racism at the u.s. department of agriculture, as with newshour political editor david chalian, the administration apologizes to a fired employee. >> lehrer: plus, a tom bearden oil spill report on the dispute over how to block the flow of oil into threatened tidal estuaries in louisiana. >> woodruff: and, on this 60th anniversary of north korea's attack on the south, jeffrey brown revisits that first hot conflict of the cold war, and explores its continuing legacy with warren wiedhahn, a u.s. marine veteran of the war, plus historians michael beschloss and

alex roland. that's all ahead on tonight's "newshour." major funding for the pbs newshour has been provided by: and by the alfred p. sloan foundation. supporting science, technology, and improved economic performance and financial literacy in the 21st century.

and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> woodruff: the campaign to toughen financial regulation in the u.s. reached its climax today. it came nearly two years after the financial meltdown that triggered the current recession. >> woodruff: the financial overhaul bill was one of the chief items on the president's agenda and he signed it with fanfare, before an audience of 400 lawmakers and others. >> it will finally bring transparency to the kinds of complex and risky transactions that helped trigger the financial crisis.

shareholders will also have a greater say on the pay of c.e.o.s and other executives, so they can reward success instead of failure. and finally, because of this law, the american people will never again be asked to foot the bill for wall street's mistakes. ( applause ) there will be no more tax-funded bailouts. period. >> woodruff: mr. obama also billed the new law as the strongest package of consumer financial protections in history. >> and that's not just good for consumers; that's good for the economy, because reform will put a stop to a lot of the bad loans that fueled a debt-based bubble. and it will mean all companies will have to seek customers by offering better products, instead of more deceptive ones. >> woodruff: democrats-- led by senator chris dodd of connecticut and congressman barney frank of massachusetts-- pushed the bill to passage. but republicans stayed away from the signing ceremony and

remained skeptical. senate minority leader mitch mcconnell said today the new law is bad for small business. >> when you cut through all the talking points about what financial regulation will do, the practical, real-world effect of this bill in the near term will be job loss. that's the real story here. for more than a year and a half, the president and his democrat allies on capitol hill have pushed an anti-business, anti- jobs agenda on the american people in the form of one massive government intrusion after another. >> woodruff: among other things, the new law will give the government new power to break up firms that pose a major risk to the economy; bring the complex financial transactions known as derivatives under federal regulation and create a consumer financial protection agency under the federal reserve. this afternoon, a white house spokesman said there's no decision yet on who would lead the agency.

elizabeth warren is considered a leading contender for the post. she's currently chair of the congressional panel that oversees tarp, the bank rescue fund. but opposition in the senate could make her confirmation difficult. for more on the new law and how well it addresses the causes of the financial crisis, we get two views. phillip swagel served as the treasury department's chief economist under president george w. bush, from 2006 to 2009. he is currently a professor of finance at georgetown university. and, lynn stout, a professor of corporate and securities law at u.c.l.a whom we've talked to regularly since the crisis hit. thank you both for being with us. philip swagel, to you first. is this a significant step forward in, an improvement? >> it is. there's a lot of good in this bill. not everything is good and a lot depends on how the bill is implemented by the regulators, including the same regulators who didn't revent the last crisis.

but there are some good elements in it. >> and lynn stout, same question. is this a positive thing on balance? >> i think it looks like a step forward. but the reality is in a lot of ways the congress just kicked the can down the road and deferred issues. it's going to remain to be seen whether this proves to be effective. a lot will depend on what happens in the future in terms of the agencies being created and that are being asked to police against practices actually being able to do their jobs. >> let start out with what you think will be effective. philip swagel, what do you think is going to work in this legislation? >> work, i'd say what would be helpful is giving the fed in particular the ability to get financial information from any firm. so a picture like aig that had a subsidiary in london, that was basically beneath the radar. now the fed will have the ability and a mandate to find out about those firms, so that's good. the transparency for derivatives, bringing those complex transactions into more daylight and giving regulators

the ability to look at them, that's also good. >> they're going to be traded, some of them, will now be traded on the open exchanges. and lynn stout, what do you see that's positive in here? before we get to the other side. >> well, i think one of the most promising developments will be the creation of the new consumer financial protection agency. although the key thing, the key question there is who is going to be put in charge of it. the first person to be made the head of this consumer financial protection commission is going to have a definitive impact on whether the agency is effective or not. the leading candidate is clearly elizabeth warren. the agency was her idea, it her brain child, she's a long-time consumer advocate. she would be probably a very effective watch dog. but as you can imagine there's a lot of pushback from the banks. they don't want a watch dog, they want a lap dog. so it remains to be seen whether the administration will have the current to follow through on this agency and put it in hands that are going to make sure it really effective. >> philip swagel, how do you see this consumer protection

bureau? >> it one of those things that cob good or it could be harmful, and it depends on how it implemented. the key is that there's a tradeoff between protecting some people, but harming others. that if you crack down too hard, then that means that some people will be protected, but others won't get a loan or won't get a credit card. and that has negative effects, and it's hard to strike the right balance. what i think is the most important is that whoever is in charge of this new agency focus on the substance, not go for a quick hits or easy lawsuits or the tv cameras, but really focus on the substance. >> so both of you i think are in agreement that what matters here is who runs it and how it's run. >> that's right. >> what about this new power for the government to take over firms, lynn stout, that are in danger of threatening the whole financial system? >> i'm much more skeptical about that, about whether that provision will be of any real use. if the government was very good at anticipating and preventing problems on a case

by case basis, i don't think we would be here today. >> can you expand on that? >> yes. in effect the government is saying we'll wait until the patient is already sick and then we'll rush him to the operating table and fix them up. what may have been a missed opportunity was the chance to use this financial crisis to pass some very simple straight forward strict legal provisions that would have prevented these big banks from geting in trouble in the first place. and rather than do that very clearly, what the legislation does instead is say we'll give some new powers to the federal reserve to take action if they think they see a problem. and they just don have a good track record on seeing problems. >> how do you see this piece of it? >> i agree, it's very difficult for a regulator to see a failure before it happens. what the bill will do is give more power after a failure takes place. so lehman brothers, the federal government, the treasury, my old boss hank

paulson did not have the legal authority to save the firm or even to cushion its disillusion. and the new bill will give the secretary vast new powers, they can take over a firm and do anything, put public money, favor some people over others and that's an awesome power that can be used for good or bad. >> you said a minute ago that there were several things that are troubling in here. >> this is run of them. it demuch depends on how it's used. it gives so much flexibility and i worry that the instance we've seen of this has already been used for mischief. and this is the bankruptcy of general motors and chrysler, the federal government using the tarp essentially did something akin to nonbank regulation lewis, the ability to -- resolution. the ability to take over a company. the money went into the auto companies and out to the united auto workers. and that's probably not what people had in mind with the tarp. >> lynn stout, what else is

there in this law that gives you pause? >> well, the treatment of derivatives i think was really critical part of the law that not many people understand. but it's absolutely essential, because essentially the creation of a derivatives market took what would have been a kind of relatively confined consumer finance crisis and magnified it many times into a huge speculative bubble. and the bill originally when it came out of the senate agriculture committee was quite strong and looked like it was going to reign in the derivatives market, the version that president obama has signed seems to address the problem by having a requirement that derivatives be traded on clearing houses and exchanges because when they are traded on clearing houses and exchanges history has taught us we really don't have these kind of speculative bubbles and problems. but there's a loophole, there's an exception in the bill that says that people can deal in derivatives off of the exchanges and clearing houses

if they're customized and not accepted for trading. so we're going to have to wait and see just how good wall street is at exploiting that loophole. it could be that a couple years from now we have the same problem we had just two years ago. >> and in previous, philip swagel you said you're not a concerned about that? >> i think there's improvement in the transparency. underline the crisis where bad lending decisions, people bought houses they couldn't afford. derivatives made it worse, and the transparent sit will help, but ultimately we're all human and it's hard to avoid every single crisis. >> i want to ask you about the republican complaint that this law ultimately will keep businesses from hiring, that it will prevent the creation of new jobs. >> again, there's a tradeoff that the more you protect and the more you crack down, the tradeoff is that there is some activity that will not happen. some loans that will not be made, some credit that will be more expensive. people will face higher interest rates. it's hard to find that balance.

but there will be an effect. >> lynn stout? >> i have to say i think the charge that this reform is going to hurt jobs is absolutely ridiculous. it was the elimination of regulation that led to the loss of more jobs than since, than we've lost since the great depression. there is absolutely no evidence that moving our system back, just part of the way toward the regulations we used to have, is going to hurt the economy or job creation. >> and final to both of you, lynn stout, is this legislation likely to prevent another meltdown? >> i wish i could say the answer is yes. i think it will clearly put it off until after the election. but whether it will really prevent another meltdown, i'm not very optimistic there. although the bubbles we can expect to see in the future may be smaller. >> philip swagel? >> i just don't think that the removal of regulation was at

the heart of this crisis. when president clinton signed the bill changing regulation in the late 90s, i don't think president clinton was at fault here, and this will help prevent crises, but i think it's impossible to prevent all crises. >> all right. we're going to leave it there. philip swagel, lynn stout, thank you both. >> thank you. >> lehrer: still to come on the "newshour": the shadow economy in greece; an administration apology; a federal-state face off in louisiana and u.s./korea 60 years on. but first, the other news of the day. here's hari sreenivasan in our newsroom. >> sreenivasan: the chairman of the federal reserve promised today to take action to bolster the recovery, if need be. at a senate hearing, ben bernanke voiced concern about slowing growth. >> the economic outlook remains unusually uncertain. we will continue to carefully assess ongoing financial and economic developments, and we remain prepared to take further policy actions as needed to foster a return to full utilization of our nation's productive potential in a

context of price stability. >> sreenivasan: bernanke played down chances the economy will slide back into recession. but he said record low interest rates need to stay in place for an extended period. the mood on wall street turned sour after bernanke spoke. the dow jones industrial average lost 109 points to close at 10,120. the nasdaq fell 35 points to close at 2,187. federal efforts to fight off home foreclosures are not working. that's what a senate committee heard today, from special inspector general neil barofsky. he said foreclosure filings continue unabated, despite programs for lenders to modify the terms of troubled home loans. but barofsky said the u.s. treasury refuses to set clear goals. >> treasury's continued indications that this is a successful program without identifying these goals and benchmarks is simply not credible, and i fear that the growing public suspicion that this program is an outright failure will continue unless and

until treasury adopts this recommendation and comes clean with what its goals and expectations are. >> sreenivasan: the government has provided up to $50 billion for mortgage modification efforts. but barofsky said lenders get too much leeway to decide whether to reduce a homeowner's principal balance. british scientists have found the heaviest star ever spotted in the universe. the star-- labeled "r-136--a-1" was once 300 times the mass of our sun-- and remains 10 million times as bright. the report today placed the star in the tarantula nebula at the center of a cluster of stars. it's roughly 165,000 light years from the milky way. those are some of the day's major stories. now, back to judy. >> woodruff: next tonight: the economic crisis in greece. air traffic controllers began a work slowdown there today, and are threatening rolling strikes starting sunday, as they demand more staff and new equipment. the greek government says it must hold down public spending if it's to cure the country's financial ills.

our economics correspondent paul solman continues his reporting from greece tonight with a look at the country's vast underground economy. it's all part of his continuing coverage on "making sense of financial news." >> reporter: swimming pools. a private pool in athens implies a certain level of income, and you're taxed accordingly. tax returns in one area reported 324 pools. yet, when the authorities searched the area on google earth, they found 17,000. a campaign to end the astonishing level of tax fraud in greece and help correct a huge budget deficit was on. and, says prime minister george papandreou, it's working. >> tax evasion is going down. we have higher tax revenues even in the first few months after the new tax law which we passed. >> reporter: the new law shifts the greek tax burden to higher incomes, with a new top rate of the new law also imposes stiff penalties on tax evasion. to journalist tasos teloglu, tax

reform may be the key to saving the greek economy. >> nobody here pays his real taxes. the richer you are in this country, the less money you pay for tax. >> reporter: you brought us to this rather desolate spot, why? >> this is the street of the so- called fun industry. that means the biggest nightclubs of that city are around this street. and here is most of the black money washed. >> reporter: well, i mean, how much money can you spend at a table at a nightclub like this? >> one famous case was about 8,000 euros. it was a porn star involved and a son of an ex-general secretary of the governing party. >> reporter: ex-pols as high rollers. the porn star, meanwhile, was julia alexandratou, a sometime singer whose 2007 hit, "the target is cash," helped define the debt-drenched decade.

♪ >> reporter: these days, julia flaks for a hot new internet gambling site on the only billboards in use in athens. they're otherwise empty, suggesting the fear, if not yet insolvency, of more traditional taxable business. but the internet is tax free. and much of the greek economy was and still is, says economist manos matsaganis. >> we have to invent a new of doing things and very fast. the kinds of problems we are facing are really 19th century that we did not resolve at the time and we are obliged to face them now. >> reporter: like what? >> corruption, for example. corruption is huge in the healthcare system. >> reporter: the government recently accused 57 athens doctors of tax fraud, and is criminally prosecuting some. but tasos teloglu says the

problem persists. >> you need to bribe to get in the hospital and get a bed. you need to bribe to get in the operation room. you have to bribe not only the doctor that's operating you, but the whole team of the doctors, plus the nurses. >> reporter: and, says teloglu, it isn't just the medical profession. >> i have a lawyer friend that declares 12,000 euros a year, and he makes 300,000 euros a year. so every three to five years, a controller comes from the finance ministry, and this controller gets 5,000 to 10,000 and the case is finished. >> reporter: everyone bemoans the corruption here. including the avoidance of the vat, or value-added sales tax, says food writer diane kochilas, who moved here from new york 20 years ago. >> taking your kid, you know, to the orthodontist. you don't pay all at once. so at the end of it, you ask for a receipt, and the orthodontist says, "i'm sorry, but you should have told me that from the

beginning, because the price would have been different." >> reporter: and how much more would it have been? >> it would have been 20%, whatever the vat tax was at the time, plus his income tax would have been factored into that. >> reporter: no receipt, no record for the government, no vat or income tax paid. >> and you encounter that all the time. you walk into stores and people say, you know, this is, you know, one euro with a receipt, 80 cents without a receipt. >> reporter: until now, most have gone without. in an economy dominated by the state-- 50% of g.d.p.-- and tourism, 15%, the one globally competitive industry has been shipping. unfortunately for the tax- starved greek economy, most of it is based off-shore. nicos vernicos, whose family has run local tugboats for generations, is known to be one of the few shipping magnates who does pay his taxes. >> reporter: you're a rich man. when we talk to people here,

they complain, "the rich don't pay taxes, the rich take their money out of the country, particularly shipping, and it's in some sense if not your fault, you're in part responsible." >> the ship owners are paying taxes on a flat fee for the tonnage. the shipping community is bringing money to greece. those who do not pay the taxes are not the wealthy or the big companies. they are the small merchant-- the small people who have made money illegally through corruption and they don't want to declare it because they cannot prove where they took the money from. >> reporter: the big blame the small. the small, the rich. >> justice means the big fish must pay. >> reporter: small businessman and professor nick sigrimis is struggling to keep his firm, which automates greenhouses and fish farms, afloat.

like so many greeks, he and his workers are now suffering pay and benefit cuts, income and sales tax hikes. the government has to hook those on top, he insists. >> the government has to get the big fish in order to present to the people that we do what we have to do and we need the pele to come along with us in the effort that we do to get out of the crisis. >> reporter: journalist teloglu agrees. >> the political justification of the austerity program will come if you catch the big ones. we have a famous case of a big ship owner not paying taxes for the real estate he bought in southern athens. some days after he was caught by the authority-- that's similar to the i.r.s. here-- he withdrew from the greek banks, 600 million euros and sent them to

banks abroad. so the government was thinking twice on whether they would prosecute a guy like that. >> reporter: so the people who tell us that the austerity program is because of money that they themselves did not borrow are right? >> ( laughs ) we are all sinners, but we didn't have-- all of us the same sins on our backs. >> somebody stole the money, not us. >> reporter: to the governments number two man, however, theodoros pangalos, the new greek myth is to blame the other guy. >> but everybody stole the money. when you manage to get your son or your daughter in the public sector or in a job that was not needed, then you stole the state. when you accepted to have a coffee without... >> reporter: tax collection, the sales tax. >> yes, then you were cheating the fisc. and this goes on for every aspect of our life. all these taxi drivers were stealing every day small amounts

from the state, all of them. and this makes a big, big, big amount of money, all these taxi drivers, every day, all over greece. >> reporter: all these taxi drivers. all these shipping magnates. all these lawyers and doctors. will they now start paying their share? >> i will tell you a story: my wife is pregnant. she will give birth in october. she went to the doctor and the doctor asked her for the usual, 50 euros for her to be examined in the state hospital. wellwe decided not to go to this doctor again, but this was the second doctor with whom we had the same experience. and i warned her on how many we should go until we find somebody that he doesn't ask that. >> reporter: ave you found the person yet? >> not yet. >> reporter: if and when he does, maybe greece will be on the road to solvency at long last.

>> lehrer: now, a story about politics and race that was here and then it wa't, and that was a story itself. it moved toward a semi- conclusion this afternoon with a white house apology over the firing of a u.s. department of agriculture employee. it was an abrupt about face. white house spokesman robert gibbs conceded today the firing of shirley sherrod was hasty and wrong. >> she is owed an apology and i would do so on behalf of this administration. >> lehrer: it all began when the conservative web site biggovernment.com posted video of sherrod, from an n.a.a.c.p. event. she described working for a farm assistance group in 1986, and meeting with a white farmer who, she said, acted "superior."

>> i was struggling with the fact that so many black people had lost their farmland. and here i was faced with having to help a white person save their land. so i didn't give him the full force of what i could do. >> lehrer: that was part of a two and a-half minute clip and once it got out, the agriculture department quickly demanded sherrod's resignation. the n.a.a.c.p. also condemned her comments, until last night when it posted her entire 43- minute speech on its web site. in it, sherrod went on to say meeting the white farmer actually changed her views. >> working with him made me see that it's really about those who have versus those who don't. you know, and they could be black, they could be white, they could be hispanic. >> lehrer: n.a.a.c.p. leaders said the full speech makes clear that sherrod's words were

manipulated. >> as we dug into it, we realized that indeed that videotape had been maliciously edited. and indeed what they were presenting to us then was not even close to being accurate. >> lehrer: late this afternoon, secretary vilsack offered his own apology. back at the white house this afternoon, spokesman gibbs said secretary vilsack was apologizg to sherrod. >> lehrer: sherrod accepted the white house's apology, but said she may not want her job back even if it was offered.

the sherrod incident came after the n.a.a.c.p. had called for the tea party movement to address allegations of racism within its ranks. here now is "newshour" political editor david chalian. david, what does this say, this whole kind of strange, if that's the word, set of events, boom boom boom, all the happened in 24 hours, what does it say about how information is heard and how quickly it is reacted to, boom boom boom these days? >> you've nailed it that it is an information issue. i don't recall eveseeing an administration make a personnel decision based on the hour by hour news cycle. but in this 24-7 world, you saw the white house, the department agriculture react and act upon incomplete information and that is why robert gibbs hung his head today and that is why secretary vilsack was out there apologizing. they had to admit that they actually took administrative action before they had all the facts. we in the press, many news organizations, showed these

clips before we understood the full context of these clips. we didn't see that full speech at the time, so again all the players, the administration, the press, in this game, if you will, took incomplete information to the public. >> and the naacp as well? >> no doubt, they issued a statement, jim, where they condemned her. they wanted to be very clear that they don't stand for racism on any side of any issue, yet they retracted that last night and said they had been snookered. and i think to some degree we all were snookered. >> but there's a tea party angle to this, is there not, in terms of the begining with the naacp? >> that's right, because where this all started was at the naacp convention, they passed a resolution condemning racist elements in the tea party what they called some racist elements in the tea party. they passed this resolution and sarah palin and other tea party advocates sort of rebuked this resolution. but that is where this started because then that conservative

website, big government.com, they wanted to show, hey, it's not just the tea party that has racist elements, but look at that agriculture employee. but again it was not the full story. but that is the genesis of it. it was that kind of response. >>. >> lehrer: but you're thinking that what's behind all of this is everybody has to act e very quickly. the reaction button goes before -- well, as the secretary said before, some thinking goes on. >> right. usually pundits react to things quickly and perhaps some political candidates. but not usually the white house and the administration. but it shows the change in our society, is it administration specifically this president. he goes out there day after day bashing the cable channels and all the chatter and the pundits and says he pays no attention to that. this is a case of no, they pay so close attention to that hour by hour news cycle that they even made uninformed decisions about firing someone in their administration based on that cycle. >> lehrer: there was one

element this afternoon when gibbs was holding his news conference and cnn was on, and miss sherrod was on, during the news conference. and he responded right there in, at the news conference. >> instant reaction. as he was offering the apology, cnn had miss sherrod onto turn to immediately and say do you accept. she accepted the apology so, you're right, we watched it play out even at this last stage of it as thed amgs was apologizing we were still getting a reflection of where we are as a society. >> and quickly, the tea party caucus in the house had its first meeting today. tell us about that, what is that and what does it mean? >> this is a new caucus inside the mostly republicans obviously that are joining it. michelle back man of minnesota had this idea of let's put together a tea party caucus. what it is, they're trying to harness the energy of the tea party movement, without

coopting it. because the tea party activists around the country don't want this top down leadership. they don't want back man or others to tell them what they're about. but the republicans know that that is where the energy in their party exists so, they want to harness in some way without coopting. it what's fascinating is the republican leader split. you don't see john boehner joining this caucus, but you do see the number three leader or the chairman of the house republican campaign committee, pete sessions, they are joining this caucus so i think we're seeing the divide of how closely republican leaders want to associate themselves with the tea party. >> david, thank you. >> my pleasure. >> woodruff: in the gulf of mexico today, retired coast guard admiral thad allen warned a storm system may move into the area this weekend. that means b.p. might have to stop testing the cap on its blown well and let the oil resume flowing. meanwhile, local authorities and federal scientists are butting heads over how to block the oil that's already spilled. "newshour" correspondent

tom bearden has a report from grand isle, louisiana, on how this is playing out in a bay along the coast. >> reporter: massive amounts of oil flowed into barataria bay in late may, contaminating marshes, beaches, and wildlife breeding grounds. local and parish officials had seen it coming, asked for help and didn't get it. so they took matters into their own hands. b.p. had hired some 50 local fishing boats to help with the cleanup, but hadn't given them any orders. jefferson parish officials used a state law to commandeer the boats and put them to work picking up oil. deano bonano is the parish's emergency director. >> within an hour, our fire and policemen had it organized and those boats were on the move, attacking the oil coming onshore. >> reporter: that effort was a start, but wasn't enough, so local and state officials are lobbying for something bigger. manmade stone jetties like these protect entrances to marinas all over the world.

city fathers here in grand isle louisiana believe the same approach, scaled up dramatically might keep a great deal more oil from entering barataria bay, one of the best fisheries in the country. they want to build two rock walls, each nearly 7,000 feet long to help narrow the entrances to the bay. but federal government officials so far have denied that request because they say it would cause too much environmental damage. federal biologist patti holland says a rock wall would try to force too much water into too narrow a space. >> from the fish and wildlife services standpoint, we're concerned that the rock barrier will neck down the passes to the point that the velocity of water going through the pass will cause tidal scouring and possibly cause breaching of the islands. because the water is going to want to go to the place of least resistance. when it does that, it could blow through an island. >> reporter: but governor bobby jindal says that risk is hypothetical.

the oil is not. >> i'll say it again, rocks in the water are much more preferable to oil in the water. oil is doing much more damage to barataria bay. i wish the folks in d.c. could touch the oil, smell the oil, see what it's doing to that nursery. barataria bay, the gulf's nursery. >> reporter: after the wall was rejected, state and local officials once again took matters into their own hands. >> because the corps of engineers wouldn't give us approval for our rock wall plan, we've stacked barges at a 45 degree angle coming from the east, headed toward the northwest, to steer oil as it comes to this 7,000 foot opening. we're going to narrow that down to less than 1,000 feet. >> reporter: the principle is pretty simple: incoming currents are channeled into an area ringed with heavy booms made from steel pipe where any oil can be skimmed up. it's working, but bonano says a wall made of rocks would provide protection in a storm, something the barges can't do. >> the barges have to be moved every time there's a threat of a storm. it takes us days to get all of this stuff out of here. every time there's a threat in

the gulf, we're gong to have to move these barges and boom and bring them back out. and the oil would be free to go in the estuary. the rocks don't have to be moved. bonano says the wall would also be cheaper-- about $16 million. currently the barge operation costs $30 million a month. but holland says the water that would be re-channeled might not only damage the barrier islands, but could also rupture oil pipelines in the bay. >> there are a lot of pipelines that go through these passes. and if we increase tidal scouring then we could potentially have another oil spill on our hands. and that's the last thing we'd want to have happen. >> reporter: bonano has been holding a series of meetings with groups of scientists, hoping to come to an agreement. >> we challenged them. don't just tell us this is a bad idea. u tells as scientists how we can modify this project to address your concerns of the effects of the estuary, yet still protect it from the oil. that's the challenge we left them with.

>> reporter: dr. ioannis georgiu is one of the scientists who reviewed the application. he says scientists want to help. they just need more time. >> i understand the emergency situation and i don't disagree. i agree this is an emergency situation and we have to do something. what i don't know and i'm not sure its been explored is alternatives that are perhaps easier to implement. >> reporter: but governor jindal says the time to act is now. and he says the wall could be removed when the threat of oil is past. >> some folks have expressed concern about the permanent placement of rocks and unintended consequences. let's be very clear, even in the last submission, the state required them to make the rocks temporary and in the fourth plan they are now submitting, b.p. has agreed to fund the removal of the rocks. the rocks are on the barges. they are waiting to go. let's go ahead and get this done. >> reporter: the bay has received something of a reprieve-- no new oil has arrived in about three weeks. but this is the height of the

hurricane season, and everybody is keeping a wary eye on the gulf, hoping that the predictions of above average hurricane activity will turn out to be wrong. >> lehrer: finally tonight, that bloody conflict in korea called the forgotten war. jeffrey brown has our story. >> brown: in korea today, stark reminders of tensions past and present, for two american officials-- secretary of state hillary clinton and secretary of defense robert gates. they got a first-hand look across the 160-mile heavily armed line that divides north and south-- the demilitarized zone along the 38th parallel. >> right where you see that brown tower, that's one of the north korean guard posts that's manned by about 30 north korean soldiers. >> brown: secretary gates, who'd been to the d.m.z. twice before, noted there'd been little progress across the border.

>> loong out across the d.m.z., it's stunning how little has changed in the north, and yet how much south korea has continued to grow and prosper. the north, by contrast, >> brown: in fact, if anything, tensions have increased in recent months. the u.s. and south korea will soon begin joint military exercises. and in seoul, the two americans held security talks with their south korean counterparts and announced new sanctions against the north, which the u.s. says is pressing ahead with its nuclear weapons program. >> these measures are not directed at the people of north korea who have suffered too long due to the misguided and aligned priorities of the government. they are directed at the destabilizing illicit and provocative policies pursued by that government. >> brown: those provocations include the march 26th sinking of a south korean warship the cheonan in the yellow sea and 46 sailors on board were killed.

after the ship was raised, an international investigation concluded that a north korean torpedo attack had sunk the ship. north korea denied any involvement, and its state t.v. broadcast images of protests against the u.s. and south korea. today's official visit was also part of a remembrance of the 60th anniversary of the start of the korean war that began with a surprise attack by at least 90,000 north korean troops with backing from the soviet union on june 25, 1950. >> high overhead, u.n. pans roam the skies at will. >> brown: the u.n. security council voted to defend the south with a multinational force and president harry truman-- without asking congress to declare war-- committed u.s. soldiers to what he would call a police action. poorly trained and equipped american troops rushed to the peninsula from occupation duty in japan where they were first quickly pushed deep into the south by the north koreans.

months later, the tide turned with an amphibious landing at inchon, and the 15-nation u.n. force led by american general douglas macarthur routed the northern armies all the way to the yalu river. that, in turn, drew in massive armies of communist chinese who sent the allied forces into a hasty winter retreat. general macarthur called for carrying the fight into china, but was overruled and fired for insubordination by president truman, in one of the great tests in american history of civilian control of the military. the war then settled into a stalemate along the 38th parallel and ended in an armistice on july 27, 1953, but never in a formal peace treaty. for years, the official american combat death toll was set at some 56,000. but in 2000, the military lowering the death toll to 37,000.

long known as the "forgotten war," sandwiched between the definitive victory of world war two and the trauma of vietnam, the korean conflict was honored with its own memorial on the national mall in 1995. some reflections on the korean war now, from retired marine corps colonel warren wiedhahn, one of the first americans deployed to korea. he's now president of military historical tours, which takes americans to battlefields where the u.s. has fought. alex roland is a military historian at duke university. he served in the marine corps from 1966 to 1970, including one tour in vietnam. and "newshour" regular, presidential historian michael beschloss. roland as a matter of history, when you look back at the korean war, in what ways did it impact the american experience of war? >> we had just come out of the second world war, in fact both of the world wars were the last of the world's great

power wars, and we were beginning a new phase which has continued right up to the present day of what you might call asim metric warfare in which the united states is the strongest military power in the world, i was in 1950, it still is, but we cannot use that military power always to achieve victory. and this was our first introduction to that dilemma. >> and that sense of ending but not ending, was that unusual at that time? >> well, we had had wars before that came to inconclusive conclusions. but so soon in the wake of world war ii, i think it was a shock to most americans. >> michael, in terms of cold war political history, what stands out for you as you look back? >> well, this was a korean war with a lesson for later presidents and not a very good one. because as you said in the package that opened this segment, harry truman in 1950 didn't bother to go to congress and ask for a war declaration, which the constitution, at least by my

reading, requires a president to do. didn't go to americans and explain this war very well. and the result was that the war was very quickly unpopular. trum map might had been defeated had he run for re-election in 1952, the reason would have been korea. and based on that model when lyndon johnson got into vietnam in 1965, he didn't go to congress for war declaration, same has been true of every president who has gotten into a car since then. in many way i think it was a bad lesson. >> colonel look back at the particular experience of what was was it like to be there. >> well, one of the things i'd like to say right up front is that some people call it the forgotten war. the veterans don't call it the forgotten war, they call it the forgotten victory. we were very successful in korea. we were successful in the fact that there was the beginning of the end of the cold war. and so it was not forgotten to us. >> and the experience for you and many, all wars brutal, this one had a particularly

brutal moments to it. >> well, we landed the first marines that landed in korea was in august of 1950. and i was extremely hot and humid, matter of fact we had probably more casualties due to heat than we did to the inme -- the enemy. and then we made the inchon landing, did the liberation of seoul and in a short period of time we were in a place where the temperatures were below zero. so we went from the hottest part of korea to the coldest part of korea. and it was, that what i remember. >> a lot of people when they think of this, there's the memory of especially when the chinese entered, fighting an enemy that was willing to attack and die en masse. >> well, the irony of war is strange because i was stationed in china in 1948 and 49 and we were the last marines to leave china before the communists took over in february of '49. so two years later here i was in north korea fighting the same people that we had been

drinking and eating with in china two years before. >> alex rob land, pick up on this notion that we've now, this phrase we've used, the forgotten war. how did that happen? how did that come to be? >> i think because of the contrast with world war ii, where we did achieve unconditional surrender of our enemies. and korean war was an ugly war, i was miserable on both side. there were high casualties. we were introduced to psychological warfare and mistreatment of our prisoners by the enemy. and it came to an inconclusive end and we were unable to achieve the kind of victory we had before. and for that reason i think most americans wanted to forget it in the relatively happy days of the 1950's when the united states was returning to prosperity after the great war. >> what about for the military and the military leadership, how did that war come to be, come to be felt afterwards? >> right. i agree with the colonel, that

within the military it was seen in many ways as a success, as a victory. we achieved our goal, which was driving the north koreans out of the south. and as the war proceeded we came to believe that this might actually be a diversion of faint and that the soviet union might be preparing an offensive in europe. so we redirected our forces to europe and we were more concerned about that than we were about korea. >> michael, i was thinking about this earlier today, for people of our generation, the one point where the korean war hit the huge popular culture was the tv program mash. >> right. >> and yet that was seen or read as commenting on vietnam. >> yes, i think that's right. and it really says something that korea for younger people was sort of a blank space for all those years until mash in popular culture of but the other thing that korea did was it poisoned our politics. because alex was talking about the contrast between the victory in world war ii and what happened in korea.

we got in in 1950, americans didn't know why we were there. maybe dean atchison goofed and made a speech saying perhaps korea was outside our defense perimeter, so suddenly we're involved in this war, up to 58,000 casualties, and people were looking for a reason. america the only superpower, why did this happen. many people said there must be communist spys in the american government, to some extend this led to mccarthyism. and americans were very much angry about the fact that here we were, we should have expected a few years of a breather after world war ii, we didn't get it. and they looked within us to try to find answers, some of which were pretty bleak. >> did you and other vets returning almost put it behind you and move on? or i'm still trying -- you said it's not a forgotten war. >> quick story, i was stationed in new york right after the war, and my buddy and i went down to the vfw in schenectady and tried to join and they said you can join, you're not a war vern.

you were in a police action. so at that moment in time -- >> that's what happens when a president doesn't declare war. >> that's right. and i'm a life member of the vfw now, but at that moment in time we were not eligible to join the vfw. so what happened was in many cases the korean war vern went back to the farm, went back home, went to church, got married and forgot the war. >> and especially in the past when we've had all the talk of the greatest generation of world war ii, which did not, i guess, in that sense include -- >> did not happen. that's why a lot of peel call it the forgotten war. we were saab witched between world war ii and vietnam, we were just in there and i was a police action, i wasn't a war. the people didn't get involved, didn't get ener sgrized -- ener jized. so they forgot about the war. the veteran never forgot. >> alex roland, we start our piece by looking at e vens today where korea is front

page news, no doubt the big e change since the war is the incredible growth of south korea. but in what ways do you see the war as still with us, still with our politics? >> oh, i think it's with us because of the way t war ended. there wasn't a peace treaty, there was just an armistice which in fact south korea refused to sign. so the war is still unsettled in a way, and that has left open the open sore between north korea and south korea that prevents them reconciling their differences and creates the unhappy world situation that we are faced with in north korea, a truly dangerous and perhaps irrationale government that has its hands on a very large military establishment and probably nuclear weapons. >> michael, you've chronicled all the presidents since, but here's another president, we're watching his officials, the secretaries there today, trying to deal with that aftermath. >> yes, and hopefully he learns from history, i'd like to think that presidents do. oftentimes they don't.

1954 after korea, at least after the armed truce, i think if we had been alive i would have said no president of the future is going to make the same mistake that truman made of not asking for war declaration, not explaining it to americans, making sure that veterans were treated well when they came back. and what happened 10 years later, lyndon johnson made virtually all the same mistakes in vietnam and to some extent george w. bush did in iraq years later. so an historian would be expected to say take a look at history. but here's a case where people did not and it was tragic. >> and a brief last word from you colonel, because i know you take vets back to korea in your business. >> we take them to vietnam too, incidentally i'm a vietnam veteran also. >> so what is the experience like for -- >> the experience is awesome really. the korean government, and i have to give the korean government credit, very good credit because they invite the veterans back. this year they paid all their way and half of the air fare

to invite them back. and it's really moving. i could tell you stories right now that would bring tears to your eyes for the veterans going back for the first time, and the first thing they do is begin to reflect on the buddies that they lost. and they say to themselves why me. why did i make it and my pudy john didn't make it. >> we want to thank you all three. alex roland, michael beschloss, colonel wiedhahn, thank you very much. >> thanks. >> lehrer: again, the major developments of the day: president obama signed into law the first major overhaul of the financial system since the great depression. the chairman of the federal reserve ben bernanke warned the economic outlook remains unusually uncertain. and the obama administration apologized for firing an agriculture department worker over racial remarks. it turned out she was taken out of context and agricultural secretary vilsack said today: "i did not think, before i acted." the "newshour" is always online. hari sreenivasan, in our newsroom, previews what's there. hari? >> sreenivasan: learn about the

newest special interest group on capitol hill-- the tea party caucus. that's on "the rundown." also there, a reporter's dispatch from the international aids conference in vienna looking at eastern europe's drug problem, which is feeding the fastest growing h.i.v. epidemic in the world. there's more of paul's interview with the greek prime minister. and watch a conversation with all that and more is on our web site, newshour.pbs.org. judy? >> woodruff: and that's the "newshour" for tonight. i'm judy woodruff. >> lehrer: and i'm jim lehrer. we'll see you on-line and again hereomorrow evening. thank you and good night. major funding for the pbs newshour has been provided by: and the william and flora

hewlett foundation, working to solve social and environmental problems at home and around the world. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. captioning sponsored by macneil/lehrer productions captioned by media access group at wgbh access.wgbh.org u forget it. yourself, so don't fall.

u forget it. now he tells us. how far am i off the floor? about twelve inches. twelve whole inches?